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The (Ever) Powerful Ladies from Maine

- February 18, 2009

Over on Marginal Revolution today, I see that the economists are puzzling over the allocation of highway spending dollars to the states in the newly enacted stimulus bill. According to data posted on ProPublica , it appears that infrastructure spending in the recently enacted American Recovery and Reinvestment Act (aka the stimulus bill) is not targeted to the states with the highest unemployment rate. It appears from the data that low population states (Wyoming, the Dakotas, and others) make away like bandits. A reasonable question is raised whether better targeting of stimulus dollars should have occurred.

Now Lee, as a loyal South Dakotan, might have some interesting thoughts about the merits of South Dakota. Still, left unanswered by the economists is why Congress chose to allocate infrastructure spending without regard to the states’ economic needs. In fact, this is not the only pot of money directed to the states in the stimulus bill that provides disproportionate dollars to small states: In the final version of the bill, 65% of the Medicaid dollars were distributed by formula across the states (with the formula giving relatively small weight to population) and only 35% based on state unemployment rates. If the Senate had had its way, only 20% of the dollars would have gone to to the unemployment bonus.

Are senators from populous states just less institutionally savvy than their small state colleagues? More likely, the allocation of federal stimulus dollars is a function of malapportionment and Senate rules. As Frances Lee and Bruce Oppenheimer show in Sizing Up the Senate, spending formulas are typically biased towards the interests of the small states. It takes 26 states to form a majority coalition, and small state senators’ votes are the cheapest to buy.

But whoa there, Binder. A majority coalition? What about the filibuster? Yes, sixty Senate votes were needed to pass the stimulus, so the spending allocations had to be acceptable to the pivotal senators. Call the roll! : Ben Nelson (Nebraska), Susan Collins (Maine), Olympia Snowe (Maine). What a surprise that stimulus dollars don’t appear to be terribly well targeted to economic needs of the states.